New Zealand`s unemployment rate rose to its highest level in nearly five years in the September quarter, as the effects of a recession saw businesses lay off workers, official figures showed Thursday.

The unemployment rate rose to 4.2 percent in the September quarter, up from 3.9 percent in the three months to June, Statistics New Zealand said.

The bad news came two days before a general election, with polls suggesting Prime Minister Helen Clark`s Labour Party is likely to be tipped from power by John Key`s centre-right National Party.

Unemployment has risen in each of the last three quarters after hitting a record low of 3.4 percent under the current measurement system in the December quarter of last year.

The rise reflects the recession that took hold in the first half of this year, due in part to a drought and the ending of a long-running housing boom.

The central bank has forecast the unemployment rate will rise to five percent next year. But this forecast was released before the latest turmoil in global economic markets, which is likely to aggravate the problem.

Despite the rise of unemployment, the number of people in jobs rose slightly to a record high of 2.17 million people in the September quarter, with the number of unemployed people rising 6.3 percent to 94,000.

The participation rate, which measures the proportion of people in work or actively looking for jobs, also rose slightly to 68.7 percent, Statistics New Zealand said.